What motivates people to give their money to charity? As a college student I have heard many of my peers say things like, “well if I had more money I would donate more to charity”, but is that the case for the rest of Americans?
When it comes to giving, humans clearly stray away from the rational model. Charitable preferences are never stable, information is very rarely asymmetric, and utility differs depending on how the donation is given and perceived.
One of the most surprising facts of charity in America is that the people who can afford to give the least are the ones who donate the largest portion of their income. In 2011 the wealthiest Americans (top 20%) contributed 1.3% of their income while those at the base of the pyramid (bottom 20%) donated 3.2% of their income.
Why is this? Some experts speculate that the internal drive to accumulate wealth may not be consistent with the idea of communal support and knowing what it is like to need help.
A study done at UC Berkley found that an increase in wealth lead to an increase in unethical behavior, meaning that the rich are more likely to prioritize their interests over those of other people.
So the question then becomes, is it exposure to need that drives altruism and that the wealthy are too sheltered? A study done in California allowed researchers to observe all of the different zip-codes, leading them to find that the less affluent ones gave relatively more.
This question holds when the study continues to look at wealthy people who live in more economically diverse neighborhoods, such as San Francisco, and they were the ones who gave a higher percent of their income.
The less wealthy were also more likely to give to religious organizations and social service charities, while the wealthy gave more of their money to organizations like colleges, and museums. So it seems that there is an exposure effect in place that has to do with what people are surrounded by.
Unfortunately the majority of the rich don’t come into daily contact with the types of organizations that need the most help, which is a problem that should be solved in order to best distribute the donated funds in America to those who need it the most urgently.